Saleen under siege

Mustang shop facing dealer ire, cash crunch

A large Ford dealership in Texas is suing Saleen Automotive, alleging fraud and breach of contract, and another dealership says it's having similar problems getting Saleen to deliver a supercharged Mustang that was promised and paid for long ago. Financial documents show that Saleen is deeply in debt and low on cash.

But CEO Steve Saleen, a former race car driver who has been customizing performance cars since 1984 and rose to fame with his go-fast Ford Mustangs, says those dealerships' experiences aren't representative. Saleen says it's a "small miracle" his company has gotten to where it is since he was forced to start anew several years ago.

In its lawsuit, Red McCombs Ford in San Antonio says three 2015 Mustangs it paid Saleen Automotive to modify arrived six months late and missing more than $22,000 in upgrades. The dealership says it has been unable to get a refund for the missing equipment and extra months of floorplan expenses -- which would amount to half of the $60,850 in cash with which Saleen said it started the year.

Meanwhile, Friendship Ford of Bristol in Tennessee says it's still waiting for a "Yellow Label" Mustang it ordered from Saleen more than a year ago. Ford Motor Co. sent the Mustang in September to Saleen's 4-acre headquarters in Corona, Calif. After lengthy delays that the company blamed on a vendor, the car's whereabouts have become a mystery, according to a Friendship executive.

Saleen, which originally agreed to deliver the $55,000 Mustang by the end of last year, told Friendship and Automotive News that it was shipped in early June. More than a month later, Denny Fruth, Friendship's general manager, said he's still waiting.

"I don't know where the car is. I don't have a clue," said Fruth, who envisioned the 715-hp Mustang helping to draw customers into his showroom. "Every month this year, it's been another story. I actually thought about jumping on an airplane to L.A. and walking in the shop to see if it's in there."

High demand

Steve Saleen, who started upfitting Mustangs in 1984, acknowledged that customers have experienced delays. But he said his company has delivered "hundreds" of modified Mustangs since Ford redesigned the car for the 2015 model year.

"Demand for the new car has been unbelievable," said Saleen, 67. He said he was unaware of the Red McCombs lawsuit, which was filed June 1, and said it "seems a little frivolous," given that all of the dealership's cars have been delivered.

"This is a new model, so it takes a while for us to get up to a rhythm here," said Saleen, a 1996 inductee to the Mustang Club of America's Hall of Fame. "We don't buy anything off the shelf. We completely re-engineer the vehicle. All the tooling, we have to start from scratch. Everyone just thinks, "Oh, you just put a supercharger on it.'"

A predecessor company, Saleen Inc., assembled the previous Ford GT supercar from 2004 through 2006. But Steve Saleen lost the use of his own name when he resigned in 2007 to start a new company. He regained the Saleen brand name in 2012, after a legal battle, and Saleen Automotive became publicly traded over the counter in 2013.

Still a startup

Since the new company's 2011 incorporation, regulatory filings show it has lost about $30 million and earned a quarterly profit only once -- in 2014. At the end of 2015, Saleen Automotive listed assets worth $745,755 and liabilities of $11.4 million. The company also said $1.3 million of its accounts payable at year end were more than 90 days late and that it owed $401,689 in past-due rent as of March 24.

"These factors raise substantial doubt about the Company's ability to continue as a going concern," it said in its most recent quarterly report, noting it is "not generating sufficient funds to cover operations."

Steve Saleen said his company is still a startup but growing in spite of the challenges its niche presents. He said its vehicles perform well and generate strong margins for dealers.

"There's a reason why there aren't a lot of companies like us that do this, but for us to have been doing it every model year as long as we have, we must be doing something correctly," Saleen said. "Year over year, we have been improving. As with any company, we continue to need capital."

The company reported revenue of $3.8 million in its 2015 fiscal year, but it lost $8.5 million. That compares with 2014 revenue of $5.1 million and a loss of $11.1 million.

A Ford spokesman said the automaker has no contractual relationship with Saleen Automotive. In addition to Mustangs, Saleen makes high-performance versions of the Chevrolet Camaro, Dodge Challenger and Tesla Model S.